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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

Amendment No. 1

 

X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 2, 2022

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 0-19621

JANONE INC.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of

incorporation or organization)

41-1454591

(I.R.S. Employer

Identification No.)

 

 

325 E. Warm Springs Road, Suite 102

Las Vegas, Nevada

(Address of principal executive offices)

89119

(Zip Code)

 

702-997-5968

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

JAN

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes No

As of August 11, 2022, there were 3,150,230 outstanding shares of the registrant’s common stock, with a par value of $0.001.

 


JANONE INC.

INDEX TO FORM 10-Q

EXPLANATORY NOTE

Restatement Background

On April 17, 2023, the Company’s management and the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) reached a determination that the Company’s previously issued unaudited consolidated financial statements and related disclosures for each of the quarterly periods ended July 2, 2022 and October 1, 2022, should no longer be relied upon because of a material misstatement contained in those two quarterly unaudited condensed consolidated financial statements. The Company’s management and the Audit Committee discussed the matters with Frazier & Deeter, LLC, the Company’s independent registered public accounting firm for the 2022 fiscal year, and with WSRP, LLC, the Company’s independent registered public accounting firm during the second and third quarters in the 2022 fiscal year and prior fiscal periods since 2019, and determined to restate the Company’s unaudited condensed consolidated financial statements for the second and third fiscal quarters ended July 2, 2022, and October 1, 2022.

In connection with the Company’s preparation of its unaudited condensed consolidated financial statements and related disclosures for its second quarter, the Company’s management and Audit Committee relied upon the report issued by a third-party valuation firm to determine the carrying value of the promissory note the Company had received from SPYR Technologies, Inc. (the “SPYR Note”), in connection with the Company’s sale of the assets of its GeoTraq, Inc. subsidiary to SPYR Technologies, Inc. in the second quarter of the Company’s 2022 fiscal year. The accounting treatment for the SPYR Note had financial statement implications to (i) two line items in the Company’s Condensed Consolidated Balance Sheets (specifically, Note receivable, net and Accumulated deficit), (ii) two line items in the Company’s Condensed Consolidated Statements of Operations And Comprehensive Income (Loss) (specifically, Gain on sale of GeoTraq, and Interest expense, net), resulting in a decrease in net income of approximately $1.8 million and a decrease in net loss of approximately $93,000 for the 13 weeks ended July 2, 2022 and October 1, 2022, respectively, and (iii) two line items in the Company’s Condensed Consolidated Statements of Cash Flows (specifically, Gain on sale of GeoTraq and Accretion of note receivable discount), resulting in decrease in net income of approximately $1.8 million for the 26 weeks ended July 2, 2022, and $1.7 million for the 39 weeks ended October 1, 2022. Further, in connection with the preparation of the Company’s Quarterly Report on Form 10-Q for this quarterly period, the Company also received guidance from an additional third-party source in connection with the review of those unaudited condensed consolidated financial statements and related disclosures. However, in connection with the Company’s 2022 fiscal year-end audit and the preparation of its consolidated financial statements and related disclosures for that fiscal year, the Company’s management and the Audit Committee concluded that the carrying value of the SPYR Note, as set forth in the aforementioned Quarterly Reports, should be restated. The initial carrying value of $11.2 million should be restated to be $9.4 million and reflect carrying value of $9.5 million as of July 2, 2022. This quarterly restatement has an impact on net income (loss), but not on operating cash flows for any period.

Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements

This amended Quarterly Report on Form 10-Q includes unaudited consolidated financial statements for the quarters ended July 2, 2022 and July 3, 2021, as well as relevant unaudited interim pro forma financial information for the quarterly periods ended July 2, 2022 and July 3, 2021. The Company will also file an amended Quarterly Report on From 10-Q for its third fiscal quarter ended October 1, 2022.

See Note 3 Restatements and Reclassifications; Note 7 Notes Receivable; Note 19 Loss Per Share; Note 22 Segment Information; and Note 25 Sale of GeoTraq in Part I. Financial Information Item 1. Condensed Consolidated Financial Statements for such restated information on the quarterly unaudited condensed consolidated financial statements for this second quarter of the Company’s 2022 fiscal year. Further, the gain associated with the GeoTraq disposition (Technology segment) has been restated and presented as discontinued operations for the periods ending July 2, 2022. As such, the results of the Technology segment have been reclassified and presented as discontinued operations for the periods ending July 3, 2021.

2


JANONE INC.

INDEX TO FORM 10-Q

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

Item 1.

Condensed Consolidated Financial Statements

4

 

Unaudited (Restated) Condensed Consolidated Balance Sheets as of July 2, 2022 and January 1, 2022

4

 

Unaudited (Restated) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the 13 weeks and 26 weeks ended July 2, 2022 and July 3, 2021

5

 

Unaudited (Restated) Condensed Consolidated Statements of Cash Flows for the 26 weeks ended July 2, 2022 and July 3, 2021

6

 

Unaudited (Restated) Condensed Consolidated Statements of Stockholders’ Equity for the 13 weeks and 26 weeks ended July 2, 2022 and July 3, 2021

7

 

Notes (Restated) to Unaudited Condensed Consolidated Financial Statements

8

 

Item 2.

Management’s Discussion and Analysis (Restated) of Financial Condition and Results of Operations

33

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

 

Item 4.

Controls and Procedures

41

 

PART II. OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

43

 

Item 1A.

Risk Factors

43

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

 

Item 3.

Defaults Upon Senior Securities

43

 

Item 4.

Mine Safety Disclosures

43

 

Item 5

Other Information

44

 

Item 6.

Exhibits

45

 

SIGNATURES

46

3


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Condensed Consolidated Financial Statements

 

JANONE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per-share amounts)

 

 

 

July 2,
2022

 

 

January 1,
2022

 

 

 

(As restated)

 

 

 

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,181

 

 

$

705

 

Trade and other receivables, net

 

 

4,273

 

 

 

4,220

 

Income taxes receivable

 

 

12

 

 

 

 

Inventories

 

 

494

 

 

 

1,104

 

Prepaid expenses and other current assets

 

 

869

 

 

 

1,423

 

Current assets from discontinued operations

 

 

 

 

 

105

 

Total current assets

 

 

6,829

 

 

 

7,557

 

Property and equipment, net

 

 

2,676

 

 

 

2,113

 

Right to use asset - operating leases

 

 

4,268

 

 

 

3,671

 

Intangible assets, net

 

 

345

 

 

 

268

 

Note receivable, net

 

 

9,464

 

 

 

 

Marketable securities

 

 

570

 

 

 

 

Deposits and other assets

 

 

1,554

 

 

 

1,556

 

Total assets

 

$

25,706

 

 

$

15,165

 

Liabilities and Stockholders' Equity (Deficit)

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,839

 

 

$

5,071

 

Accrued liabilities - other

 

 

4,963

 

 

 

5,232

 

Accrued liability - California Sales Taxes

 

 

6,140

 

 

 

6,022

 

Lease obligation shortterm - operating leases

 

 

1,405

 

 

 

1,304

 

Shortterm debt

 

 

 

 

 

288

 

Current portion of notes payable

 

 

315

 

 

 

261

 

Current portion of related party note payable

 

 

223

 

 

 

1,000

 

Current liabilities from discontinued operations

 

 

 

 

 

195

 

Total current liabilities

 

 

18,885

 

 

 

19,373

 

Lease obligation long term - operating leases

 

 

2,964

 

 

 

2,470

 

Longterm portion of notes payable

 

 

1,509

 

 

 

1,318

 

Long-term portion related party note payable

 

 

724

 

 

 

 

Other noncurrent liabilities

 

 

219

 

 

 

680

 

Total liabilities

 

 

24,301

 

 

 

23,841

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Preferred stock, series A - par value $0.001 per share 2,000,000 authorized,
   
222,588 and 238,729 shares issued and outstanding at July 2, 2022 and
   January 1, 2022, respectively

 

 

 

 

 

 

Common stock, par value $0.001 per share, 10,000,000 shares authorized,
   
3,150,230 and 2,827,410 shares issued and outstanding at July 2, 2022
   and January 1, 2022, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

45,747

 

 

 

45,743

 

Accumulated deficit

 

 

(43,727

)

 

 

(53,804

)

Accumulated other comprehensive loss

 

 

(617

)

 

 

(617

)

Total stockholders' equity (deficit)

 

 

1,405

 

 

 

(8,676

)

Total liabilities and stockholders' equity (deficit)

 

$

25,706

 

 

$

15,165

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(Dollars in thousands, except per-share)

 

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty Six Weeks Ended

 

 

 

July 2,
2022

 

 

July 3,
2021

 

 

July 2,
2022

 

 

July 3,
2021

 

 

 

(As restated)

 

 

 

 

 

(As restated)

 

 

 

 

Revenues

 

$

10,538

 

 

$

8,606

 

 

$

19,862

 

 

$

17,278

 

Cost of revenues

 

 

8,889

 

 

 

6,863

 

 

 

16,360

 

 

 

14,114

 

Gross profit

 

 

1,649

 

 

 

1,743

 

 

 

3,502

 

 

 

3,164

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

2,906

 

 

 

3,650

 

 

 

5,847

 

 

 

6,241

 

Operating income (loss)

 

 

(1,257

)

 

 

(1,907

)

 

 

(2,345

)

 

 

(3,077

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(61

)

 

 

(125

)

 

 

(253

)

 

 

(198

)

Gain on Payroll Protection Program loan forgiveness

 

 

 

 

 

 

 

 

 

 

 

1,872

 

Gain (loss) on litigation settlement, net

 

 

 

 

 

(1,950

)

 

 

1,835

 

 

 

(1,950

)

Gain on settlement of vendor advance payments

 

 

 

 

 

131

 

 

 

 

 

 

941

 

Gain on reversal of contingency loss

 

 

 

 

 

 

 

 

637

 

 

 

 

Unrealized loss on marketable securities

 

 

(376

)

 

 

 

 

 

(376

)

 

 

 

Other income, net

 

 

333

 

 

 

22

 

 

 

359

 

 

 

22

 

Total other income (expense), net

 

 

(104

)

 

 

(1,922

)

 

 

2,202

 

 

 

687

 

Income (loss) from operations before provision for income taxes

 

 

(1,361

)

 

 

(3,829

)

 

 

(143

)

 

 

(2,390

)

Provision (benefit) for income taxes

 

 

4

 

 

 

205

 

 

 

7

 

 

 

203

 

Net income (loss) from continuing operations

 

 

(1,365

)

 

 

(4,034

)

 

 

(150

)

 

 

(2,593

)

Net income from discontinued operations, net of tax

 

 

10,239

 

 

 

(945

)

 

 

10,235

 

 

 

(1,884

)

Net income (loss)

 

$

8,874

 

 

$

(4,979

)

 

$

10,085

 

 

$

(4,477

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share from continuing operations

 

$

(0.43

)

 

$

(1.68

)

 

$

(0.05

)

 

$

(1.12

)

Basic income (loss) per share from discontinued operations

 

$

3.25

 

 

$

(0.39

)

 

$

3.25

 

 

$

(0.81

)

Diluted income (loss) per share from discontinued operations

 

$

2.93

 

 

$

(0.39

)

 

$

2.93

 

 

$

(0.81

)

Basic income (loss) per share

 

$

2.82

 

 

$

(2.07

)

 

$

3.20

 

 

$

(1.94

)

Diluted income (loss) per share

 

$

2.54

 

 

$

(2.07

)

 

$

2.88

 

 

$

(1.94

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,150,230

 

 

 

2,405,410

 

 

 

3,150,230

 

 

 

2,312,024

 

Diluted

 

 

3,496,250

 

 

 

2,405,410

 

 

 

3,496,250

 

 

 

2,312,024

 

Net income (loss)

 

$

8,874

 

 

$

(4,979

)

 

$

10,085

 

 

$

(4,477

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Effect of foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(42

)

Total other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

(42

)

Comprehensive income (loss)

 

$

8,874

 

 

$

(4,979

)

 

$

10,085

 

 

$

(4,519

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

 

 

For the Twenty Six Weeks Ended

 

 

 

July 2, 2022

 

 

July 3, 2021

 

 

 

(As restated)

 

 

 

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$

10,085

 

 

$

(4,477

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
   activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

270

 

 

 

2,090

 

Amortization of debt issuance costs

 

 

7

 

 

 

 

Stock based compensation expense

 

 

4

 

 

 

180

 

Accretion of note receivable discount

 

 

(64

)

 

 

 

Gain on legal settlement

 

 

(115

)

 

 

 

Gain on Payroll Protection Program loan forgiveness

 

 

 

 

 

(1,872

)

Gain on settlement of vendor advance payments

 

 

 

 

 

(941

)

Gain on reversal of contingent liability

 

 

(637

)

 

 

 

Gain on sale of GeoTraq

 

 

(10,241

)

 

 

 

Unrealized loss on marketable securities

 

 

376

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(53

)

 

 

(204

)

Income taxes receivable

 

 

(12

)

 

 

173

 

Prepaid expenses and other current assets

 

 

554

 

 

 

110

 

Inventories

 

 

610

 

 

 

303

 

Right of use assets

 

 

(597

)

 

 

(681

)

Lease liability

 

 

595

 

 

 

650

 

Accounts payable and accrued expenses

 

 

713

 

 

 

2,485

 

Deposits and other Assets

 

 

(6

)

 

 

(123

)

Net cash provided by (used in) operating activities

 

 

1,489

 

 

 

(2,307

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(721

)

 

 

(1,458

)

Purchases of intangibles

 

 

(189

)

 

 

(65

)

Net cash used in investing activities

 

 

(910

)

 

 

(1,523

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from equity financing, net

 

 

 

 

 

5,544

 

Proceeds from stock option exercise

 

 

 

 

 

27

 

Proceeds from notes payable

 

 

366

 

 

 

1,835

 

Payments on related party notes payable

 

 

(53

)

 

 

 

Payments on notes payable

 

 

(128

)

 

 

(59

)

Payments on short-term notes payable

 

 

(288

)

 

 

(144

)

Net cash provided by (used in) financing activities

 

 

(103

)

 

 

7,203

 

Effect of changes in exchange rate on cash and cash equivalents

 

 

 

 

 

(42

)

INCREASE IN CASH AND CASH EQUIVALENTS

 

 

476

 

 

 

3,331

 

CASH AND CASH EQUIVALENTS, beginning of period

 

 

705

 

 

 

379

 

CASH AND CASH EQUIVALENTS, end of period

 

$

1,181

 

 

$

3,710

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Interest paid

 

$

120

 

 

$

84

 

Income taxes paid

 

 

54

 

 

 

28

 

Right to use asset - operating leases capitalized

 

 

1,451

 

 

 

1,244

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

JANONE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(Dollars in thousands)

 

 

Series A Preferred

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(As restated)

 

Balance, January 1, 2022

 

 

238,729

 

 

$

 

 

 

2,827,410

 

 

$

2

 

 

$

45,743

 

 

$

(53,804

)

 

$

(617

)

 

$

(8,676

)

Share based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

(41

)

 

 

(49

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,211

 

 

 

 

 

 

1,211

 

Balance, April 2, 2022

 

 

238,729

 

 

 

 

 

 

2,827,410

 

 

 

2

 

 

 

45,747

 

 

 

(52,601

)

 

 

(658

)

 

 

(7,510

)

Series A-1 preferred converted

 

 

(16,141

)

 

 

 

 

 

322,820